This article is part of Morningstar’s Guide to Investing Ideas for 2015, our comprehensive round-up of where the most promising stocks, funds and markets can be found this year.
Most of us have a running list of to-dos flitting through our heads, many of them financial. Update your will, rebalance your portfolio, top up your ISA contributions for this tax year.
The first step towards accomplishing your many to-dos, financial or otherwise, is to block out the time to get each task done, one at a time. That's what this calendar is designed to help you do.
January
Create a Personal Balance Sheet
The festive season can pack a punch financially, but January’s bank statements will hopefully not be too painful to bear.
Begin the year by taking stock of your net worth; gathering up your most recent investment statements and going online to retrieve your current and credit account balances.
Once you've documented your assets minus liabilities, consider the following questions:
1. Does any single financial asset consume a disproportionate share of your net worth?
2. Are your assets adequately insured?
3. If you're still working, do you have enough assets in place in your taxable accounts to cover your living expenses for six months or more?
4. If you're currently retired, do you have enough assets in highly liquid investments to cover two years' worth of expenses as well as any emergencies or home and car repairs?
5. How does your net worth compare with what it was at this time last year?
6. How does your current debt load compare with what it was a year ago?
February
Make ISA Contributions
You have until April 5, 2015 to make a contribution of up to £15,000 to your ISA for the 2014/2015 tax year. However, if you are sending instruction via post, or purchasing an asset that is not traded daily you may have to fulfil your ISA requests earlier, so check with your ISA provider. If you have the cash on hand, you may want to set up your 2015/16 ISA at the same time. Next year’s ISA allowance will be £15,240.
Check out Morningstar's ISA Centre for more on ISAs and what role they can play in your portfolio as ISA season gets underway. Don't forget about Junior ISAs too for the young savers in your life.
March
Revisit Your Assumptions
The start of a new year is an ideal time to take a close look at the assumptions you've made regarding your ability to reach your goals. In particular, you'll want to revisit your time horizon, as deadlines such as your retirement date may have changed, your savings interest rate, your asset allocation. To help add some rigour to your analysis, turn to an online tool such as Morningstar's Asset Allocator tool.
Sign up to Morningstar's Portfolio Monitor Report to receive a PDF report by email each month that tells you exactly what your investments have been up to and how much you can reasonably expect to earn over the next 10, 20 and 30 years.
April
Implement a Budget
Did your analysis in January lead you to conclude that you need to save more and spend less in order to reach your investment goals? Join the club. With interest rates still at record low rates, many individuals have rightly determined that the best way to get ahead is to do it the old-fashioned way: save more.
The first step is to analyse your current spending patterns. Track your expenses for a month or two on a spreadsheet or manually. Group your current monthly expenditures into two key categories: nondiscretionary – such as your mortgage, utilities and taxes, and discretionary – which includes clothing and cappuccinos. Once you've done that, take a moment to review whether your spending matches up with your priorities. Also, look hard at the discretionary list for items you can reduce or do without altogether. Armed with that information, create a monthly budget that includes an aggressive savings target.
Collate Your Tax Information
As the tax year draws to a close on April 5, rather than waiting until the last minute – the deadline for submitting your annual self-assessment tax review online is January 31 2016 – grab the bull by the horns and cross this item off your To-Do list as soon as possible. You'll thank yourself for getting them out of the way early, and if you don't do your own taxes, your accountant will thank you.
May
Put Your Investments on Autopilot
Once you've created your budget, it's time to put your savings plan into action. Much as you invest in a pension plan at work, you can use your fund company or brokerage firm's "auto-invest" option to contribute to your taxable investment accounts or, preferably, your tax-efficient accounts such as ISAs on a monthly basis. Such a programme helps ensure that you're putting money to work in bad markets as well as good ones.
Build an Emergency Fund
An unexpected cost such as a car repair, household disaster or medical bill can easily derail your budget. The best way to keep that from happening is to make sure you have an emergency fund in place; three to six months' worth of basic living expenses held in highly liquid investments.
June
Tackle Estate Planning
If you don't have a will and an estate plan in place, it is time to address these items. You should also re-examine your estate plan about every five years to keep your plan in sync with tax-law changes and major life events.
Start by identifying a solicitor who specialises in estate-planning matters. Prepare for the meeting by itemising your assets; if you created a personal balance sheet back in January, you're well on your way. What's considered a taxable estate is apt to change in the years ahead, but no matter your asset level, you still need an estate plan to spell out who you would like to care for your children should something happen to you, who you would trust to make healthcare and financial decisions on your behalf if you were unable to do so and who you want to serve as executor of your estate. After your solicitor has drawn up your estate plan, don't forget to take the next step and update your beneficiary designations.
July
Check up on Insurance Needs
More than half of financial success is finding a way to sidestep, or at least minimise, disasters. Putting in place an emergency fund, which you did back in May, is one way to do that. Another way is to make sure that you've purchased adequate insurance coverage, whether it be household insurance, life assurance or private healthcare.
August
Tackle the Paperwork
Most people hang on to way more paperwork than they need to, particularly given that so much of this information is available online now. Start by making sure you have a good understanding of what to keep and what to throw away. Keep important documents like marriage and birth certificates, preferably in a safe-deposit box, as well as tax returns for the past seven years.
I also like to hang on to receipts big-ticket items such as jewellery and electricals. Toss the many extraneous items that accompany your investment statements, such as marketing materials.
While you're getting organised, look into managing your accounts and receiving statements online. If you do not wish to move online, create a logical filing system for your paperwork. The key is to create a system that would be understandable to someone else.
September
Set Up a System for Tracking Investments
Tracking your investments isn't fun or simple, especially if you pound-cost average or reinvest your dividends and capital gains. But keeping good records of your purchases, sales, reinvested dividends and capital gains can give you greater control over your investment-related taxes. Some investors use spreadsheets to document their purchase prices and reinvested dividends and capital gains.
Your brokerage firm or fund company may also provide this information on your statements or online; if they don't, you can call and ask for your purchase-price history along with any reinvested dividends or capital gains. Of course, if you've been taking advantage of the tax efficiencies of ISAs, you don't need to worry about income tax on dividends or interest, nor capital gains tax on your fund returns, you don't even need to declare ISAs to HMRC.
October
Make Sure You Are On Track For Retirement
If you're not yet retired, you should be maxing out your tax-sheltered investments by the time you're in your forties. Use up the maximum ISA allowance and utilise your workplace pension – this really is free money as both your employer and HMRC will top up your savings.
November
Check Up On Intermediate-Term Goals
Are you on track for retirement? If not, you can skip this step. That may sound harsh, but the reason is pretty straightforward. Saving for retirement should be a priority over projects such as home improvements or a new car purchase.
December
Make One Last Check of Your Investments
The festive season is almost here and you've got a lot done. But before you go out and celebrate you have a few more tasks to accomplish.
First, take a look at how your investments have done over the past 12 months. If you've sold stocks or funds and realised a gain, pat yourself on the back. Then look through your portfolio for holdings that have lost captial that you can sell to offset those gains. Of course, avoid making hasty decisions – you don't want to sell a fund that you still believe offers potential and fits well in your portfolio. If you believe in the fundamentals then this weakness could be an opportunity to pick up more shares cheaply in anticipation of a rebound.
You may also want to combine tax-loss selling with portfolio re-balancing, assuming your stock/bond mix is not in sync with your asset-allocation targets. Restoring your asset allocation so it is in line with your targets will help improve your portfolio's risk/reward profile.
To minimise the tax implications of rebalancing, concentrate your rebalancing efforts in your tax-sheltered accounts such as ISAs. If your asset allocation is still off kilter, consider adding new assets to restore balance. If you must sell securities from your taxable portfolio to restore balance, try to identify some losers to offset the capital gains.
A version of this article was first published in January 2010. Additional reporting was done by Emma Wall
